What Is a Third Party Check?
Generally, when you cash a check, you take it to a bank, credit union, or check cashing store with your name on it. A check writer will make out their check to you, so that you’re the only person who can collect that money. However, this isn’t always the case. Sometimes, a person can write a check for you, and you can sign that check away to a third person, leaving it in their hands. This is what third party checking is: when person A writes a check made out to person B, but person C cashes that check. Third party checking is possible because person B can write instructions on the check, changing the party that the check is made out to to be person C.
Third party checks are not the norm, but they are useful in a number of situations:
- When a mistake is made on the original check. If the original check writer makes a mistake, and it would be difficult to write a new check, the written recipient of the check can sign it over to another party, correcting the mistake with ease.
- If the original recipient doesn’t have a bank account. Sometimes checks are written to people without bank accounts. This means that this person can’t deposit the check and, although they can cash it, the process can be less streamlined. This is especially useful for checks that are written to minors, so that their parents can keep the money safe until they grow up.
- As a form of payment. If you owe someone money and you receive a check from another person for the amount that you owe, it may be more convenient to sign that check over to the owed party, rather than cashing it yourself and writing a new check.
Risks and Issues: Why Banks Don’t Always Accept Third Party Checks
It’s easy to confuse third party checks with check fraud, but this isn’t necessarily the case. There are legal ways for a third person to cash a check that was not initially made out to them. However, many banks and credit unions are still suspicious of third party checks. Thanks to the risk associated with this type of checking, a bank may refuse to cash a third party check that you bring in. When cashing a third party check, it’s important to remember:
- Banks are not legally obligated to accept your instructions. Third party checks include a change of recipient with signature of the original recipient endorsing the alteration. However, banks are not required to follow these ad hoc instructions, and many may choose not to because of the risk involved or may only do so on a case-by-case basis.
- Third party checks are more vulnerable to fraud. Imagine this: you drop a check on the sidewalk. This check was made out to you for $100. However, an unseemly person finds the check and crosses out your name, replacing it with their own and forging your signature to add an air of legitimacy to their fraud. The risk of this kind of fraud makes many banks suspicious of third party checks.
- Contact your bank before you bring a third party check in. If you’re unsure about whether or not your bank accepts third party checks, contact them before you come in to cash your check. The bank may have special instructions for third party checks, if they accept these checks at all.
How To Endorse a Third Party Check
If you have a check that you’d like to sign over to a third party, the best thing that you can do is to write your instructions on the back of the check. Instruct the bank, credit union, or check cashing store to pay the value of the check to the order of your desired recipient. Once you’ve written your instructions, be sure to sign the back the check, endorsing the third party as the new payee. If possible, it can be helpful to get the signature of the original check writer as well. This adds more legitimacy to the transfer of the check to a third party and can help when it comes time to cash that check.
How To Cash a Third Party Check
Endorsing a check for a third party is easy — cashing a third party check is where things get more complicated. Thanks to the increased risk of fraud associated with third party checks, some banks may refuse to follow the instructions endorsing a third party to receive the check. Before you cash a third party check, be sure to call the bank or financial institution where you intend to cash it. Ask them about requirements for cashing third party checks or if they allow these checks at all. Finally, when you go to cash your third party check, make sure that you bring a valid photo ID! This will add an extra layer of security and accountability that will make the bank more comfortable when cashing your third party check.
Places That Cash Third Party Checks
Remember that not every bank or credit union will cash your checks. Requirements for cashing third party checks can be especially high, if they’re allowed at all, so it’s important to pick the right place to cash your third party check. Here are some good options to check out, but remember to call before cashing your check:
- Your bank or the bank of the check writer. Banks that service neither you nor the writer of the check are generally not required to cash your checks, third party or otherwise. If you are cashing a third party check, it is especially important to go to a bank that you already work with or that the check writer has an account with.
- Cash a check remotely with a mobile checking app. Many banks offer mobile checking through apps. If there’s no nearby branch location for you to cash your third party check at, you can do so through an app. However, remember to send in photos of both the front and the back of the check, so the instructions and endorsements can be seen.
- A credit union where you are a member. Credit unions will also cash third party checks, as long as they allow the practice and you meet their requirements. However, remember that credit unions will only work with their members, so make sure that you have a credit union membership before trying this.
- A check cashing store. Check cashing stores may cash your third party check if you meet their requirements. Be sure to call ahead to find out. However, unlike other checks, department stores like Walmart will not cash third party checks. For more information click here for information on Walmart’s Check Cashing Policy.
Third party checks are checks that end up being made out to someone other than the original recipient. Third party checks are useful, but they are also riskier. If you are writing or cashing a third party check of your own, be sure to contact a bank or other financial institution where you plan on depositing the check to find out what their requirements are for third party checks.
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